Study: Paid family leave proposal would accelerate Social Security’s insolvency

A paid family leave proposal supported in concept by some Republicans would speed up the insolvency of Social Security trust funds by about six months, according to a study released Monday by the right-leaning American Action Forum (AAF).

“The proposal … would not work so well in practice because of Social Security’s troubled financial outlook,” AAF’s Ben Gitis and Gordon Gray wrote in the report.

The report comes ahead of a Senate hearing Wednesday on paid family leave, in which Sens. Joni Ernst (R-Iowa) and Kirsten Gillibrand (D-N.Y.) are slated to testify. Sen. Marco Rubio (R-Fla.) is also expected to release a bill on the issue.

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Rubio and Ernst have expressed interest in a proposal from the Independent Women’s Forum (IWF) that would allow people to opt to get paid family leave through Social Security in exchange for deferring the collection of Social Security retirement benefits for a short time period to offset the cost.

The Social Security trust funds are estimated to become insolvent in 2034, and AAF is concerned that the paid leave proposal would worsen the outlook for Social Security. AAF noted that the proposal would have “significant upfront costs” because people would start using the new benefit now and wouldn’t delay their retirements until decades from now.

“Since very few leave-takers would reach retirement age before the Trust Funds’ depletion in 2034 (just 16 years from now), most would not have the opportunity to neutralize their impact on the Trust Funds prior to their exhaustion when delaying their retirement,” AAF wrote.

AAF estimated that the paid leave program proposed by IWF would provide $227.6 billion in benefits from 2019 to 2034, but only $1.4 billion, or 0.6 percent, of that amount would be offset prior to 2034. As a result, the vast majority of the paid leave benefits given to people before Social Security becomes insolvent would be financed by the federal government borrowing money and increasing the debt.

AAF also projected that the proposal would advance the exhaustion of the Social Security trust funds by about six months, though the group said there’s uncertainty around that estimate. While AAF said that insolvency wouldn’t be substantially accelerated, “any advancement of that date is concerning.”

IWF President Carrie Lukas said in a statement that AAF’s study is “a very limited analysis focused only on Social Security’s Trust Fund that ignores the larger picture of how this proposal would impact taxpayers and the budget more broadly.”

“There will be an upfront cost, as today’s young parents take advantage of parental leave benefits,” she said. “But the plan will have no effect on Social Security in the long run, and it will not change anything about retirement benefits for those who do not opt in.”

Lukas also said that giving taxpayers an option for paid parental leave could reduce “the number of people using other public welfare programs.” And she added that Social Security needs to be reformed to address its financial issues whether or not their paid leave proposal is enacted, and that “this is not a reason to avoid modernizing the program in a fiscally responsible way.”  

– update at 9:57 p.m.